24, no savings, Pile of debt and a 430 credit score

A twenty something individual with lots of debt reached out to others for advice on getting his credit score up and tackling his debt.

I’m 24 with a 430 credit score. I have about $6500 in collections (mostly hospital bills, the rest are phone bills/cable bills family put in my name when I was 18 and then abandoned) and a recent $2500 defaulted student loan. I have been scraping by my entire working life and have no clue how to fix any of this. I will admit I haven’t been responsible with payments on things I personally owe. I know this is a sad excuse but I raised myself and I don’t fully understand how credit and debt works, I’ve never been taught financial responsibility and I have a hard time doing more than basic survival (rent, food, utilities) I have made a mess of my finances and I’m too embarrassed to ask friends and my s/o for help. My utility bills are backed up about 3 months($500 total) due to high bills because my apartment is not insulated, so I have to have heat and electricity running high at all times to stay warm and I had a medical emergency and had to live on nothing for a while due to it and couldn’t make adequate payments, so it’s piled up. any advice on how to rebuild my credit and tackle these debts? I’m so anxious and overwhelmed. I currently work full time and make around 23-24k a year, rent an apartment and don’t own a car.

One reader responded by saying start by building a budget.  Encouraging the individual to not get over stressed by his current situation.

Don’t beat yourself up, this is fixable. Good that you are recognizing this now with a desire to change course, rather than decades from now.

You can start to right the ship today:

  1. Begin with a written monthly budget. Income vs expenses. Start focus with what you need to cover food, shelter, lights, and transportation. Collections can wait until these are addressed.

  2. Within a month or two, you should start to build an emergency fund. Up to $1000 for initial goal.

  3. When you get some stability over your budget, you can begin to deal with collections.

Rebuilding your credit score is not important today – you don’t need to be borrowing money. The score will naturally improve through correcting your financial situation.

I suggest reading Dave Ramsey’s Total Money Makeover from your local library. Follow “baby steps” 1-3. This plan will give you focus to build stability and get out of debt.

It may feel hopeless today, but you’ll be surprised how much taking control of your finances and working a plan will feel liberating. You’ve got this.

Another reader suggested getting help attacking from all sides.

You need to attack this from all angles. I like the other comments as well – ask a church for assistance. Sounds like you might want to move to an insulated apartment, and get a roommate to help with rent. If you can’t, don’t run your heat on high. Get a space heater, cover the bottoms of the doors with a towel, and dress warmly.

Then, you must stop the bleeding. Interest on debt will kill you so you may want to ask your bank or hospital to consolidate your debts into a single monthly payment. That or pay off the highest interest thing first.

Yes, you need to increase your income. Best is to make yourself more valuable to raise your hourly rate. Ask your boss about increasing responsibility if that increases salary. Or take a part-time extra shift to increase hours. Or see about third-shift options, which usually pays more and keep you at work during the coldest times of the day.

Look at every expense you have and see where you can cut. See if you can sell what you don’t need.

It’s time to get strategic about every overhead cost. NEVER eat out. Learn to cook for yourself on a stove (also helps with heat). Plan to have protein at every meal, and try to reduce costs until you’re spending less than $2 per meal. How? If you eat cold cereal and milk for breakfast, switch to oatmeal with peanut butter. Buy meat in bulk: ground turkey and beef, pork. Remove all sugar and processed foods from your diet and replace with cheap produce, like carrots. You’re going to need energy to turn yourself around, so don’t eat empty calories.

You may want to reconsider asking for help. Yes, it’s hard but your friends can loan you money to help stabilize you. Or offer you a spare room so you can give up that uninsulated apartment. If that happens, be the best tenant they ever had so they’ll wish you won’t leave.

Two other options: get to a library and take out resources on personal finance – Dave Ramsey, Tony Robbins, etc. You have to put in the extra time now to learn. I know that’s tough when you probably work the same hours the library is open, but borrowed resources don’t cost you (return on time!) anything.

Lastly, if all else fails, volunteer. Join a church and feed the homeless – you’ll eat and stay warm too. And you’ll open doors for help yourself. Don’t go alone.

Another reader suggested not worrying about the credit score but focus on cutting expenses and establishing an emergency fund.

Definitely don’t beat yourself up. Everyone needs help and people learn personal finance over time. If I were you, I’d tackle things in this order. And I numbered them to try to make it easier.

1.) Don’t make the mistake a lot of people do by getting a credit card and charging things on it when you don’t have any money. With your credit score, you’re unlikely to qualify for one anyway, but just in case you get an offer in the mail, don’t do it. Pay for as much as you possibly can with cash.

2.) Don’t worry about your credit score right now. Focus on paying down debt by saving money and trimming your expenses anywhere you can. Focus on paying down your utility bills first and foremost, because you need electricity and heat. Tackle everything else later.

3.) Download a budgeting app (like “Every Dollar”) and start tracking every dollar that comes in vs every dollar that goes out. The best and quickest way to get out of debt is to know EXACTLY how much income you have and EXACTLY where that money is being spent, down to the dollar. This way you can control your money and not the other way around. This will also let you see if there’s any areas you can trim back on.

4.) Call the hospital billing department and try to negotiate your bills down. They would rather get something from you than nothing. Make an offer. Tell them you can’t afford the full bill but you can pay part of it.

5.) Try the same thing for your phone & cable bills. You could always take the approach that these bills were put fraudulently in your name if that’s what happened to you.

6.) Get some plastic weatherproofing for your windows and draft stoppers for your doors and try to seal up any drafts where you might be losing heat. It’s a cheap fix and you can get that stuff at Walmart or Home Depot.

7.) You’re making $23k per year with no car payment and no mortgage, kids, or anything like that. That puts you in a pretty good position financially, even though you may not feel like it right now. Chances are, you can find places to trim your spending if you really try. Maybe that means cooking more meals at home, maybe that means keeping your apt. a little cooler in the winter, or cutting back on misc. expenses.

8.) Once you get all of that sorted, try to get $1000 in a savings account for emergencies and don’t touch it.


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